February 28, 2008

IMF agrees new financing deal / President rejects renegotiation of mine taxes

The IMF has agreed a new three-year financing package with Zambia and said the country could theoretically borrow around $150 million per year and still sustain its debt position. Finance minister Ng'andu Magande and the International Monetary Fund said separately they had agreed a new three-year poverty reduction growth facility (PRGF), after the expiry of the previous $320 million PRGF in 2007. Magande said the Treasury was now calculating figures for the new facility but it would be less than the previous agreement.
Before, President Levy Mwanawasa had announced that his government would not renegotiate controversial mining taxes with foreign owners of the copper and cobalt mines barely a week after he invited them to talks. The President said that the ministers of finance and mines would meet managers to discuss their grievances over introduction of a 25 percent windfall profit tax and a rise in mineral royalty to 3.0 percent from 0.6 percent. Separately, Finance Minister Ng'andu Magande let know that the mining firms should produce their statement of accounts from the time they invested to show their revenue, profits, and losses. "This level of taxes (is) now neither the highest nor the lowest in the world. To that extent therefore, this level of taxation (is) not negotiable," a presidential aide said in a statement quoting Mwanawasa. According to the latter, the meeting he had called would only take place for the government listen to views of the mining companies and not to renegotiate the new taxes or development agreements it signed with various mines at the time of investing. Mwanawasa said taxes, which had effectively been raised to 47 percent from 31.7 percent, would still 'leave substantial return on their investments.' Magande said prices of copper had reached peak levels and Zambia wanted to share profits of copper revenue, the southern African country's economic mainstay. A fortnight ago, the foreign firms told a watchdog committee of the parliament that they were rejecting the proposed windfall profit tax and other taxes because the government had not consulted them over the proposals. In January, the government also introduced a variable profit tax at 15 percent on taxable income above eight percent and raised corporate tax to 30 percent from 25 percent in a move that will effectively raise mining taxes to 47 percent from the previous 31.7 percent, starting from April. (rts)

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